LKQ Corporation Announces 2006 First Quarter Net Income Results Up 44%, With Record Revenue and Earnings
Chicago, IL—April 27, 2006--LKQ Corporation (NASDAQ: LKQX) today announced results for its first quarter ended March 31, 2006, with revenue of $192.1 million, net income of $12.1 million and diluted earnings per share of $0.22.
“Overall, we were quite pleased with the performance of the Company in Q1. We achieved record quarterly revenues and earnings and exceeded our previously issued earnings estimates. We believe this level of performance, while encountering extremely mild weather conditions in a number of our markets, reflects favorably on the geographical diversity of the Company, as well as our overall business model.”
“We achieved revenue and net income growth of approximately 44%. Our organic revenue growth was approximately 12%, and we improved our gross margins in our recycled and aftermarket businesses compared to the first quarter of 2005. This improvement was more than offset by minimal gross margins generated by the aluminum smelter operation managed by our recently acquired Transwheel subsidiary,” said Joe Holsten, President and Chief Executive Officer.
2006 Reported Results
All earnings per share amounts, stock price amounts and share counts discussed herein reflect our January 2006 two-for-one stock split.
For the first quarter of 2006, revenue increased 43.6% to $192.1 million compared with $133.8 million for the first quarter of 2005. Our organic revenue growth for the quarter was 12.4%. Net income for the quarter increased 43.8% to $12.1 million compared with $8.4 million for the first quarter of 2005. Diluted earnings per share was $0.22 for the quarter compared with $0.19 for the first quarter of 2005.
The first quarter results include approximately $725,000 of expenses related to the expensing of stock options in accordance with Statement of Financial Accounting Standard No. 123R “Share-Based Payment” (“SFAS 123R”). SFAS 123R became effective for LKQ Corporation on January 1, 2006. These expenses had the effect of lowering our net income by approximately $434,000 and our diluted earnings per share by approximately $0.01.
Our consolidated aftermarket collision replacement parts revenue for the quarter was $41.9 million.
The weighted average diluted shares outstanding for the quarter was 55.5 million compared to 45.4 million for the first quarter of 2005. The number of weighted average diluted shares of common stock in 2006 changed from 2005 due to the issuance of 6.4 million new shares in our October 2005 follow-on public offering, exercises of stock options and warrants, and the increase in our stock price.
2006 Business Acquisitions
On January 31, 2006 we acquired Transwheel Corporation, an aluminum alloy wheel refurbishing and distribution business. Transwheel currently operates refurbishing and distribution facilities in Huntington, IN; Manchester, CT; Williamsport, MD; and Tampa, FL and distribution locations in Ferndale, MI and Addison, IL. Transwheel’s third party revenue for 2005 was approximately $28.5 million from the sale or restoration of wheels. In addition to wheel revenue, a Transwheel subsidiary operates an aluminum smelter that melts damaged and unusable wheel cores as means of product disposal. For the two months in the first quarter of 2006 that LKQ owned Transwheel, the smelter’s third party aluminum revenue was $4.4 million at a gross margin of approximately 6%.
During February 2006, we acquired three recycling businesses. We acquired Michael Auto Parts located in the Orlando, Florida area that primarily serves the professional repair market. This business generated approximately $12.0 million of revenue in 2005. In addition, we acquired two retail businesses, one near Charleston, South Carolina and one near Baton Rouge, Louisiana. These two businesses had less than $3.0 million of combined revenue in 2005. Our objective during 2006 is to grow and improve these two businesses and to build their facilities into modern self-service retail operations.
Company Outlook
We expect that 2006 organic revenue growth will be in the low double digits, with the balance of the growth being the full year impact of 2005 business acquisitions and our four acquisitions that have closed in 2006. We expect net income to be within a range of $40.5 million to $42.5 million and diluted earnings per share to be between $0.72 and $0.76. Included in the guidance is an estimated $0.03 per share effect of expensing stock options for the first time. This guidance is consistent with that presented on March 2, 2006 in our 2005 year end earnings press release.
For the second quarter of 2006 we expect net income to be within a range of $10.0 million to $11.0 million and diluted earnings per share to be between $0.18 and $0.20.
We anticipate that net cash provided by operating activities for 2006 will be approximately $40.0 million. We estimate our full year 2006 capital expenditures related to property and equipment, excluding expenditures relating to any future acquisitions we may do, will be approximately $36.0 million to $38.0 million. As of April 26, 2006 we had outstanding debt under our bank credit facility of $73.5 million.
We estimate the weighted average diluted shares outstanding for the full year 2006 to be approximately 56.0 million. These share numbers are estimates and as such will be affected by factors such as any future stock issuances, the number of our options and warrants exercised in subsequent periods, and changes in our stock price.
Quarterly Conference Call
We will host an audio webcast to discuss our first quarter 2006 results on Thursday, April 27, 2006 at 10:30 a.m. Eastern Time. The live audio webcast can be accessed on the internet at www.lkqcorp.com in the Investor Relations section. An online replay of the webcast will be available on the website approximately two hours after the live presentation and will remain on the site until May 27, 2006.
About LKQ Corporation
LKQ Corporation is the largest nationwide provider of recycled light vehicle OEM products and related services and the second largest nationwide provider of aftermarket collision replacement products and refurbished wheels. LKQ operates over 100 facilities offering its customers a broad range of replacement systems, components, and parts to repair light vehicles.
Forward Looking Statements
The statements in this press release that are not historical are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our expectations, beliefs, hopes, intentions or strategies. Forward looking statements involve risks and uncertainties, some of which are not currently known to us. Actual events or results may differ materially from those expressed or implied in the forward looking statements as a result of various factors. These factors include:
· | the availability and cost of inventory; |
· | pricing of new OEM replacement parts; |
· | variations in vehicle accident rates; |
· | changes in state or federal laws or regulations affecting our business; |
· | fluctuations in fuel prices; |
· | changes in the demand for our products and the supply of our inventory due to severity of weather and seasonality of weather patterns; |
· | changes in the types of replacement parts that insurance carriers will accept in the repair process; |
· | the amount and timing of operating costs and capital expenditures relating to the maintenance and expansion of our business, operations and infrastructure; |
· | declines in asset values; |
· | uncertainty as to changes in U.S. general economic activity and the impact of these changes on the demand for our products; |
· | uncertainty as to our future profitability; |
· | increasing competition in the automotive parts industry; |
· | our ability to increase or maintain revenue and profitability at our facilities; |
· | uncertainty as to the impact on our industry of any terrorist attacks or responses to terrorist attacks; |
· | our ability to operate within the limitations imposed by financing arrangements; |
· | our ability to obtain financing on acceptable terms to finance our growth; |
· | our ability to integrate and successfully operate recently acquired companies and any companies acquired in the future and the risks associated with these companies; |
· | our ability to develop and implement the operational and financial systems needed to manage our growing operations; and |
· | other risks that are described in our Form 10-K filed March 8, 2006 and in other reports filed by us from time to time with the Securities and Exchange Commission. |
You should not place undue reliance on the forward looking statements. We assume no obligation to update any forward looking statement to reflect events or circumstances arising after the date on which it was made.
CONTACT: LKQ Corporation
Mark T. Spears, Executive Vice President and Chief Financial Officer
312-621-1950
irinfo@lkqcorp.com
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